Obama Budget To Give Physicians Two Year Respite From Medicare Reimbursement Cuts

Reading through the news stories about President Obama’s $3.7 trillion budget blueprint, one thing becomes clear: the administration didn’t want to use the document to reignite the health care debate or make waves by overtly asking for new implementation dollars for the Affordable Care Act. And so its biggest piece of health care policy — as far as I can tell — is to delay cuts in physician reimbursement rates in the Medicare program. The Hill’s Julian Pecquet has the details:

The budget proposal would postpone for two years a scheduled 25 percent cut in the Medicare physician payment formula, known as the Sustainable Growth Rate (SGR), that’s set to go into effect at the end of the year. The $62 billion “doc fix” would be paid for by “changes that squeeze Medicare and Medicaid payments to hospitals and doctors and expand the use of generic drugs in federal health programs,” according to The New York Times.

Physicians’ groups are lobbying for a permanent repeal of the SGR, and it’s not clear how they’ll respond to a two-year solution. In any event, the proposed offsets are almost certain to attract considerable criticism when the administration releases additional details on Monday.

Indeed, the AMA and most health policy wonks have been clamoring for a fix to the Sustainable Growth Rate (SGR), which came to life in 1997 as a means of controlling health care spending. According to the formula, the amount Medicare pays doctors for an average Medicare patient can’t grow faster than GDP. In 2002, medical inflation outpaced economic growth and Congress stepped in to avert the cuts and has been doing so ever since. Each year the problem just piles onto itself – so what was a 2% cut back in 2002 has mushroomed exponentially into a 25% cut.

The medical community has been pressuring Congress to stop kicking the can down the road and permanently fix the SGR but the cost of the endeavor — estimated north of $245 billion — has made a fix politically unfeasible. In 2009, the House mustered the support for a permanent “doc fix” but the effort has gone nowhere in the Senate, even as Republicans continue to argue that Democrats should have addressed the problem in the Affordable Care Act.

Obama’s two-year respite sounds like a good political compromise — it takes the politically toxic issue of the table for two years and gives doctors some relief from the anxiety of looming reimbursement cuts.